Thailand's sustainability-linked bond (SLB) issuance is a "notable advancement" for the sovereign sustainable finance landscape, Sustainable Fitch said in a Wednesday release.

With its 30 billion baht issuance, Thailand will become the first Asian and non-South American sovereign to tap the SLB market.

SLBs link coupons to the issuer's achievement of specific sustainability performance targets (SPTs), an approach that incentivizes governments to pursue sustainable practices, Sustainable Fitch said.

However, some corporate issuances have faced greenwashing accusations and investor skepticism about the impact of SPTs, the ESG rating provider said.

Properly managed sovereign SLBs could bring a more credible and impactful approach to sustainable finance, Sustainable Fitch said.

Thailand's SLB is tied to two SPTs, which will determine the bond's coupon rate through a step-up and step-down mechanism.

While the bond's issuance in the local currency may limit offshore investor participation, it will contribute to the development of Thailand's local capital market, Sustainable Fitch said.